AIG points finger at London branch

Traders at the London office of AIG were responsible for massive losses that brought about the near collapse of the US insurer, the firm has said.

Broadcaster ABC has claimed that the Mayfair-based team, led by American trader Joseph Cassano, risked half a trillion dollars (£359 billion) investing in the toxic US mortgage market.

AIG has said the figure is inaccurate, but did admit in a statement that the unit nearly "brought down" the company.

The struggling insurer has avoided collapse through a massive state bail-out totalling more than 150 billion dollars (£108 billion).

AIG is now 80% owned by the Government as a result of attempts to prop up the struggling firm.

ABC said "ground zero" for the insurer's financial implosion was the London branch.

It suggested that a series of disastrous deals saw billions pumped into risky mortgage debt.

Investigative reporter Peter Koenig told ABC's Good Morning America that the UK capital was the "epicentre" of the financial crisis. He said: "For about a decade it went OK. And then, when the US housing market fell out instead, they suddenly realised they had to come up with a half a trillion dollars and all they had was a couple of million in the bank."

The Serious Fraud Office is currently investigating the losses made at AIG's London office.

In a statement, the insurer added: "It was clear that this small unit engaged in trades that nearly brought down the company and its still sound insurance business."